PepsiCo announced strong quarterly earnings and revenue that exceeded analyst expectations on Thursday, with a marked turnaround in its North American food business contributing to the positive results. The company’s shares experienced a slight uptick in premarket trading following the announcement.
In its first quarter, PepsiCo reported earnings per share of $1.61 on an adjusted basis, surpassing the Wall Street forecast of $1.55. Total revenue reached $19.44 billion, which was also above the anticipated $18.94 billion. The company’s net income attributable to shareholders was $2.33 billion, translating to $1.70 per share, an increase from the previous year’s $1.83 billion or $1.33 per share.
Significantly, Pepsi’s net sales reflected an 8.5% increase year-over-year, buoyed by its acquisition of Poppi and new distribution deals for Alani Nu energy drinks, alongside the divestiture of Rockstar. When excluding acquisitions, divestitures, and currency fluctuations, the company’s organic revenue rose by 2.6%.
For the first time in over two years, Pepsi’s North American food business recorded a volume increase. The division, which represents the company’s Frito-Lay and Quaker Oats units, had previously struggled with consumer backlash against significant price hikes amid inflation spikes in 2022. In a bid to regain consumer trust, Pepsi reduced prices on popular products like Lay’s, Tostitos, Doritos, and Cheetos by up to 15% in February. This proactive measure appears to be yielding positive outcomes, as the food division reported a volume growth of 2% for the quarter, a key metric adjusted for pricing and foreign exchange changes.
Conversely, the North American beverage segment experienced a decline in volume by 2.5%, with higher prices contributing to reduced consumer demand. In response, Pepsi has outlined plans to “restage” the Gatorade brand, aiming to boost sales through a new marketing strategy that emphasizes the product’s hydration benefits for a broader audience. Improvements will include a lower sugar version and the removal of artificial colors, among other modifications.
To adapt to evolving consumer preferences, Pepsi is focusing on snack and beverage trends that prioritize higher protein and fiber content. Recent product launches have included Pepsi Prebiotic, Starbucks Coffee & Protein, Doritos Protein, and SunChips Fiber.
Looking ahead, the company reaffirmed its forecast for the full year, projecting organic revenue growth between 2% and 4%, with core constant currency earnings per share expected to rise between 4% and 6%. However, Pepsi executives noted concerns about economic predictability, particularly due to geopolitical tensions in regions such as the Middle East. They emphasized that systematic commodity hedging programs are in place to provide short-term protection and clarity regarding certain input costs.
